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Cboe Europe Derivatives (CEDX) is a pan-European marketplace that enables eligible participants to access a vibrant equity derivatives market through a single access point, creating efficiencies in trading and clearing. Among its offerings are futures on these 10 indices:
Indices are a helpful way to gauge economic performance, and futures on Cboe European indices offer exposure to the region each index tracks. Understanding the index’s performance before trading futures is essential to developing an informed strategy. As shown in the table above, the Cboe Netherlands 25 Index had the highest annualized return and the highest Sharpe Ratio, compared to the other indices listed. Notably, the index’s largest constituent company is the semiconductor company ASML, which was deemed one of Europe’s leading “Granolas” stocks, according to stories CNN and the Financial Times. Additionally, the Technology Sector was the largest in the index, with a 33% weighting.
The Cboe UK 100 Index had the smoothest returns with the lowest standard deviation of 12.3%. Its largest sector was Finance, with a 16% weighting. The Cboe Italy 40 Index had higher volatility and the highest standard deviation at 20.8%. Its largest sector is Finance, with a weighting of 39%.
The charts below show that the Cboe Netherlands 25 Index (BNL25P), Cboe Sweden 30 Index (BSE30P), and Cboe France 40 Index (BFR40P) indices rose more than 140% between September 2010 and March 2024.:
As shown in the heat map below, there is quite a bit of variability among the annual performance of these indices over the past six years.
The chart below shows that the worst peak-to-trough drawdowns for these indices between October 2010 and March 2024 were:
Month-end data for price return indices are used. Source: Cboe Global Markets.
Certain futures strategies may have the potential to mitigate the risks of severe peak-to-trough drawdowns.
Index futures allow investors to purchase or sell a specific underlying index at a certain value on a future date. There are a number of different index futures strategies investors can deploy to achieve different investment goals. Here are a few examples:
Bullish Strategy – Long Index Futures
An investor who anticipates rising values for a stock index may buy index futures contracts with a long position in the contracts. As shown in the heat map table above, the Cboe Eurozone 50 Index (BEZ50P) rose more than 22% in 2019 and 2021. If the index value rises, there is potential for profit on the difference between the lower purchase price and the higher selling price for the futures. If the index values fall, there is a risk of loss.
Hedging Strategy – Short Index Futures
Investors who hold broad stock portfolios for different countries and are very concerned about the possibility of a bear market in the near future may consider the strategy of selling index futures, or taking a short position in index futures. As shown in the heat map table above, the Cboe Eurozone 50 Index (BEZ50P) fell more than 12% in 2011, 2018, and 2022. For investors who properly hedge equity portfolios with short index futures positions, upside potential during rising markets is limited, and downside risk during bear markets may be mitigated.
Additional protective strategies can be found here and income-enhancing strategies can be found here.
Here is more information about Cboe Europe Derivatives (CEDX)
Learn more about Cboe Global Indices and related futures strategies
Disclaimer: This information is not being provided as part of an offer or sale of any futures or options products to any persons located within the United States.
There are important risks associated with transacting in any of the Cboe Company products or any digital assets discussed here. Before engaging in any transactions in those products or digital assets, it is important for market participants to carefully review the disclosures and disclaimers contained at: https://www.cboe.com/us_disclaimers/. These products and digital assets are complex and are suitable only for sophisticated market participants. These products involve the risk of loss, which can be substantial and, depending on the type of product, can exceed the amount of money deposited in establishing the position. Market participants should put at risk only funds that they can afford to lose without affecting their lifestyle. © 2024 Cboe Exchange, Inc. All Rights Reserved.
